This e-bulletin includes short summaries of the following recent developments. Please contact us if you would like more information.

1. Brexit: practical steps for employers

Following the Leave vote on 23 June, employers are faced with a period of considerable uncertainty. The leaving process is put in train by giving a notice under Article 50 of the Treaty on the European Union, and this currently seems to be unlikely before the Autumn. Even after that, until the UK actually leaves the EU, EU law continues to apply in the UK. The extent to which restrictions can be placed on EU migration and how much EU-derived employment law must be retained may not be finally settled until terms have been negotiated for our ongoing relationship with the EU, a process that could take several years and may not be completed when we leave the EU. Only as policies and negotiating positions become clear will employers be able to firm up their own responses. So what to do in the meantime?

Keeping abreast of developments will be key, to try and get a feel for the likely direction of travel and the consequent implications for HR. Our ebulletin here discusses what happens next, as well as outlining some practical steps. Our Brexit hub explores the implications across a range of sectors and practice areas and includes a link to our detailed (pre-vote) webinar on employment and immigration issues.

The key practical points now, in terms of employee issues, are:

  • Communicate with employees, particularly those who might be affected by changes in immigration law, provide reassurance that they will be kept informed as the position becomes clearer and consider if any current employees can apply for British (or other EU) citizenship or permanent residence now. It seems likely that transitional arrangements will be put in place to ensure EU migrants currently working here, and UK citizens working in the EU, can continue to do so. It is thought that both the EU and the UK will wish to act fairly in relation to this group of citizens.
  • Audit the immigration status of your EU migrant workforce and the workforces of the businesses in supply chains. Consider what steps might be necessary to recruit from the UK market if your business relies heavily on unskilled labour from the EU.
  • Review employment plans including for recruitment and secondment of employees. Ensure you are included in strategic discussions concerning the possible impact of Brexit, in particular relocations, offshorings, restructurings, redundancies.
  • Familiarise yourself with your procedures and ensure they are up to date. Get up to speed on information and consultation obligations under collective bargaining agreements, TUPE (and remember TUPE can apply to offshorings), collective redundancies rules, or works councils agreements.
  • Particular consideration will be needed when drafting contracts for long-term outsourcings, given the possibility that the scope of TUPE could theoretically be very different by the end of the contract.
  • If you are currently going through an information and consultation process, this may need to address concerns about the impact of Brexit.
  • Continue to prepare for implementation of the General Data Protection Regulation which is directly effective from 25 May 2018 and therefore within the 2 year period for negotiation on terms of exit from the EU. On exit, the Regulation would no longer apply but it seems likely that new domestic legislation would be implemented to replicate the Regulation or something similar (perhaps the current Data Protection Act would be re-enacted with adjustments). Compliance with high standards of data protection law will continue to be important for ongoing European trade and to ensure that the UK meets adequacy standards in order to be allowed to have personal data from Europe transfer to the UK.) The ICO has announced details of what guidance on the Regulation employers can expect and when; it has also published its response to the Brexit vote here.
  • The EU Trade Secrets Directive must be implemented by 9 June 2018. Again this is likely to be before the terms of exit are agreed and, therefore, technically the UK should implement the Directive. However, given the amount of legislation the Government will likely be implementing due to Brexit, it is possible the Directive may not be implemented at that point. In the future the Government may wish to implement in order to protect inward investment from EU countries.
  • If you have European Works Council arrangements, these should be audited. Depending on the terms of the continuing relationship with the EU and the aproach of the government of the day, EWCs may no longer be mandatory in the UK, or an EWC agreement governed by UK law may no longer be compliant with the EWC Directive. You may need to consider how to deal with UK employees and, if central management is UK-based, develop a contingency plan for relocating the base for EWC purposes.
  • In due course, review standard documentation to check whether it will still work once we have left the EU, eg, are provisions such as confidentiality/IP clauses or restrictive covenants because expressed to apply within the EU. Determine any effect on benefit schemes.
  • Be aware that, given the Brexit workload for government, there could be delays to national initiatives such as gender pay gap reporting (planned for October 2016), the extension of shared parental leave to grandparents (a consultation expected in May 2016 was shelved until after the vote), and reform of tribunal fees/structure. On the latter, the House of Commons Justice Committee has published the results of its inquiry into court and tribunal fees, recommending a substantial reduction in employment tribunal fees and strongly criticising the government's failure to publish its post-implementation review. The judicial review challenge to the introduction of tribunal fees has been listed to be heard by the Supreme Court on 7-8 December 2016.

2. New legislation: Trade Union Act and Immigration Act

  • On 4 May 2016 the Trade Union Bill received Royal Assent and will be brought in to force by statutory instruments in due course. The Trade Union Act 2016 will make significant changes to rules on industrial action and union subscriptions/ facility time (for public employers).  The Government's aim is to ensure that (i) industrial action is a last resort in the event of workplace disputes and only takes place if it has a clear and continuous mandate and (ii) employers have more time to prepare and arrange contingency plans.  While the changes may prevent some industrial action, they may also lead to parties taking entrenched positions at an earlier stage in disputes, before the possibility of settlement has been fully investigated. They could also lead to a higher incidence of wildcat (unofficial) action, which can be harder for employers to manage and resolve. Both employers and unions will need to review their tactics in light of the changes. Our detailed briefing on the implications of the Act is available here.  Note that the Welsh First Minister has recently announced plans to repeal parts of the Trade Union Act 2016 in so far as they apply to devolved public services in Wales, although the UK government's position is that the Act concerns employment rights, duties and industrial relations, which are not devolved matters and are clearly reserved for the UK Parliament.
  • The Immigration Act 2016 has also recently been enacted. With effect from 12 July 2016, there will be a new offence of working in the UK illegally and the current criminal offence of knowingly hiring an illegal worker will be extended to apply where an employer employs someone whom they have reasonable cause to believe is an illegal worker; the maximum custodial sentence on indictment will also increase from two years to five years. Other provisions not yet commenced include a new power to impose a 48 hour closure of the premises of employers and the Secretary of State will have power to introduce an immigration skills charge on certain employers who sponsor skilled workers from outside of the European Economic Area, planned for April 2017 (although the vote for Brexit may obviously affect this). Employers should take the opportunity to ensure HR systems are up to date and proper right to work checks are completed.  HR and line managers may also need to be trained to identify circumstances giving rise to a "reasonable cause to believe" someone is an illegal worker, and what steps to take if they become aware of new information about an employee's immigration status.
  • Our April e-bulletin noted the Government's intention to call for evidence on whether "non-competes" are acting as a barrier to business, hindering start-ups from hiring the best and brightest talent. The call was formally launched on 25 May, with views on the use of all types of employment-related restrictive covenant sought by 19 July - click here for details and to submit your views.

3. Statutory holiday pay: further case law developments

The appeal in the holiday pay case Lock v British Gas Trading has been listed to be heard by the Court of Appeal sooner than expected, floating over 11 to 12 July 2016.  A judgment can be expected in the Autumn and may affect how employers should calculate holiday pay where employees receive payments such as commission and overtime pay.  Our summary of the EAT decision is here.  Note that the EAT has also granted the claimants in Fulton v Bear Scotland (No 2) permission to appeal to the EAT on the issue of the time limits on their deductions claims for holiday pay. 

Meanwhile, a couple of first instance employment tribunal judgments have ruled that the calculation of statutory holiday pay (for the 4 weeks' EU-derived holiday) should include an element for voluntary overtime, voluntary standby and voluntary call out payments, provided that the work has been undertaken with sufficient regularity to have become part of the employee’s normal pay.  While the EAT has ruled that compulsory non-guaranteed overtime pay must be included, the issue of payment for voluntary overtime has so far only been considered at first instance in England (although these rulings are consistent with a decision of the Northern Irish Court of Appeal,  reported here).  The tribunal considered that overtime worked weekly or monthly over a number of years was sufficiently regular. (White v Dudley MC,  Whitehead v EMH Housing)

4. Confidential information: dealing with ex-employees

A High Court has ruled that, in the right circumstances, an employer may be able to obtain an order for the destruction of confidential information taken from it by departing employees and stored on the ex-employees' computers.  The order provided for the imaging and search of the ex-employees' electronic devices and deletion of any of the employer's confidential information found on them;  the deletion was to be carried out by the ex-employees' own IT expert and copies of the imaging of the devices were to be preserved so that information could be restored if wrongly removed.  This ruling extends the types of interim relief that may be available to employers, and will be a useful option particularly where the ex-employees' conduct suggests they cannot be trusted to delete the material themselves. (Arthur J. Gallagher Services (UK) Ltd v Skriptchenko)

It may also be effective to warn departing employees of the risk of prosecution under the Data Protection Act 1998 if they unlawfully take information about former clients – an employee was recently successfully prosecuted and fined £300 plus costs for taking the contact details of customers, as well as purchase history and commercially sensitive information (details here). 

5. Religious discrimination: cases on dismissal for refusing to leave marriage and headscarf bans

Employers may be liable for indirect discrimination where particular treatment can be viewed as a consistent practice, even if it is applied only rarely.  Further, even where the treatment would cause distress to all employees, an employee can establish the particular disadvantage required in connection with a religious belief if that employee would suffer more due to their belief.

In Pendleton v Derbyshire County Council, the employer required the claimant to choose between her job and her marriage following the conviction of her husband for downloading indecent images of children.  This put her at a particular disadvantage given her Christian belief in the sanctity of marriage, meaning that she suffered more than others in a loving and committed relationship.  Although the employer's action was a response to highly unusual circumstances, its own evidence was that it would respond in the same way should the circumstances arise again, and this was sufficient to amount to a "practice" for indirect discrimination purposes.

Employers should also keep an eye out for the ECJ's ruling on two cases concerning a dress code prohibition on the wearing of headscarves.  The Advocate-General in Achbita v G4S Secure Solutions has given a controversial opinion suggesting that a ban on all visible signs of religious, philosophical and political beliefs can be justified by an employer's corporate policy of neutrality.  In considering whether the ban was proportionate, the Advocate-General took into account the fact that the employer applied the ban consistently prohibiting all types of visible signs (whether or not wearing them was viewed as a mandatory part of a religion), the fact that a headscarf is a large and conspicuous symbol, the nature of the employee's role and that the case here involved a receptionist having contact with a diverse range of customers, the burden on employers if required to find alternative back-room roles, and the constitutional status of secularism in France (where the employee worked).  Particularly controversial is the apparent conclusion that religion is a lesser form of protected characteristic, in that it was viewed by the Advocate-General as a matter of choice rather than an immutable characteristic of an individual (such as gender or race) and therefore an individual can be expected to have to moderate their 'chosen' behaviour in the workplace.  In contrast, there is considerable support in the UK for the idea that the law should require employers to make a reasonable accommodation for religious beliefs.   It is also a little surprising how much weight was apparently given to the employer's desire to adopt a policy of neutrality, when assessing the proportionality of the ban.  The opinion can be contrasted with the ruling of the European Court of Human Rights in Eweida v UK.  In that case BA's uniform policy imposed a prohibition on visible items of adornment.  Its aim of projecting a professional corporate image and promoting recognition of brand and staff was held to be legitimate, but did not justify prohibiting the wearing of a necklace with a cross given that the cross was discrete and did not really detract from professional appearance.  Further, BA permitted the wearing of "mandatory" religious items such as turbans and hijabs and there was no evidence these had a negative impact on BA's brand. 

A second Advocate General's Opinion is expected on 12 July inBougnaoui v Micropole Univers, concerning the employer reassigning an employee who wore an Islamic veil in contravention of a client’s religious neutrality principle.  This is the first time that religious discrimination cases have come before the ECJ; it is not bound to follow Advocate-General opinions and its ruling is keenly awaited given the sensitivity of the issues involved. 

6. Dismissal: Acas Code only applies where element of employee culpability

Employers who unreasonably fail to follow the Acas Code of Practice on Disciplinary and Grievance Procedures, where it applies to a dismissal, face the risk of an uplift to compensation for unfair dismissal by up to 25%.  A lack of clarity as to when the Code applies is therefore unhelpful: the Code states that it applies to "disciplinary situations" expressly including misconduct and poor performance and excluding redundancy dismissals and the non-renewal of a fixed term contract, but is silent on other categories of dismissal.

The EAT has recently confirmed in Holmes v Qinetiq that the Code does not apply to dismissals for genuine ill-health or sickness absence; the Code will only apply where there is an element of culpable conduct on the part of the employee (eg, malingering).  Equally, the Code does not apply to dismissals which are for "some other substantial reason" such as an irretrievable breakdown in working relationships (Phoenix House v Stockman).   

Although these decisions are helpful to employers in clarifying that there is no potential 25% uplift to compensation when dismissing for these reasons, it remains prudent to follow as much of the Code as is relevant, as this will assist in demonstrating a fair procedure in relation to those types of dismissal. For example, when considering a dismissal for breakdown in working relationships, the requirements of fairness coincide with the Code requirement to give the employee an opportunity to put their case, ie to demonstrate that the relationship remains strong enough, or can be repaired, so as to allow the employee to fit back into the workplace without unacceptable disruption.

Employers should also bear in mind a previous EAT ruling that the Code will apply if an employer invokes a disciplinary process to consider misconduct allegations, even if the ultimate reason for dismissal was "some other substantial reason" and not misconduct.  Where it could be argued that the reason for disciplinary action is the employee's culpable conduct leading to the breakdown in relationships, the cautious approach would be to assume the Code may apply.

7. Disability discrimination: cases on discipline for misconduct and expectation to work long hours

  • Employers should take extra care when considering disciplining a disabled employee for misconduct, to determine if there is a link between the conduct and the disability and, if so, to ensure that the treatment is justified.  A recent EAT judgment establishes that an employer can be liable for discrimination arising from a disability where there is only a loose causal link between the disability and the misconduct for which the employee is disciplined.  In Risby v London Borough of Waltham Forest, an employee was dismissed for misconduct after he lost his temper on learning that a training course had been moved to a venue inaccessible to him as a wheelchair user.  His tendency to be short-tempered was unconnected with his disability, but the situation only arose because of his disability.  This was sufficient to mount a claim for discrimination arising from disability (although ultimately his dismissal might still be justified). 
  • Employers should consider whether they have created an expectation for employees to work long hours;  if so, they may need to consider reasonable adjustments if this places disabled employees at a substantial disadvantage.  Particular care may be needed where a new extended hours requirement is introduced for existing employees, or where there is a long hours culture which only becomes an issue for a particular employee after they suffer an illness or injury (qualifying as a disability).  In the latter case, management's willingness to accept shorter hours immediately after the employee's return to work may be short-lived, leading to pressure on the employee to return to their previous long hours.  This was the position in Carrera v United First Partners Research,where the EAT held that an expectation to work long hours a few months after the employee's return from injury was created by initial requests for the employee to work late into the evening, followed by communications simply assuming that he would do so.  This expectation amounted to a provision, criterion or practice for the purposes of a disability discrimination claim based on a failure to make reasonable adjustments.

8. Discipline: no reasonable expectation of privacy in relation to private communications impacting on work matters

Employers may be able to rely on an employee's private phone communications to justify discipline or dismissal in some cases, as employees will not always have a reasonable expectation of privacy.  Whether there is such an expectation will be fact-sensitive with relevant factors including whether the conduct concerns work-related matters, whether the employee is responsible for bringing private matters into a work situation, and whether the employee has acted in a way to indicate that they regard the material as private.  

In Garamukanwa v Solent NHS Trust the employer was entitled to rely on emails and photographs found on an employee's mobile phone and supplied by the police following a criminal investigation to justify dismissing him.  The employee was a senior manager who had sent unpleasant emails to a work colleague and her friend after his relationship with the colleague ended;  this was followed by further unpleasant anonymous emails to them and other colleagues.  The manager had turned a personal relationship into a workplace issue by his conduct and had not objected to the use of the evidence in the internal disciplinary process; he therefore had no reasonable expectation of privacy.  

The ruling does not address whether the police were entitled to pass the information to the employer, but suggests that an employer can rely on such evidence where the police have given permission.  Note that leave to appeal has been sought.

9. Discrimination: no race discrimination claim where vulnerable migrant workers abused due to immigration status The Supreme Court in Taiwo v Olaigbe and Onu v Akwiwu has ruled that less favourable treatment due to a vulnerable immigration status was not direct race discrimination;  immigration status is not expressly a protected characteristic and cannot be equated with nationality (which is a protected characteristic). 

In some cases the treatment might involve application of a practice, condition or policy (a 'PCP'), in which case an indirect race discrimination might be possible.  However, this case involved the abuse of two migrant domestic workers and it was not possible to discern a PCP. 

Lady Hale did comment that Parliament might wish to consider providing employment tribunals with the power to award compensation for victims of modern slavery who are mistreated in this way.

10. New resources: human rights, terminal illness, database of tribunal decisions

  • The EHRC has published guidance for board directors on business and human rights.
  • The TUC has launched a Dying to Work campaign, seeking better employment law rights for those with terminal illness and asking employers to sign up to a voluntary charter. 
  • Plans have been announced to introduce a new online database of employment tribunal rulings from Autumn 2016 (although this timetable may prove ambitious), available to all to search on the internet - see here.  The wider availability of decisions may be a factor to be taken into account when considering settlement.